Accounts Receivable
Money owed to your company from your customers for goods or services sold.
Asset-Based Lending
A loan to an individual or company collateralized by a specific asset or group of assets. Typically, asset-based loans do not require real property as collateral.
Assets
Any interest in real or personal property which can, if necessary, be appropriated for the repayment of debt.
Bad Debt
A debt that is not collectible and is therefore worthless to the creditor.
Balance Sheet
A financial statement showing the assets, liabilities, and equity or net worth.
Business Plan
A plan that looks several years into the future. It generally projects future opportunities and maps the financial, operational, and marketing strategies that will enable the organization to achieve its goals.
Cash Flow Financing
A short-term loan which provides additional cash to cover shortfalls in anticipation of future revenue, such as the payment of receivables.
Collateral
The intangible or tangible property given as security to the lender for any obligations and indebtedness.
Credit Report
Financial history supplied by a credit information company like Dun and Bradstreet, Equifax, Experian or TransUnion. Contains credit information on a business or an individual, including payment history of bank cards, store cards, mortgages, student loans, and trade payments.
Credit Scoring
The evaluation system used by lending institutions to determine relative credit riskiness of a business or consumer.
Current Ratio
A measure of liquidity equal to current assets divided by current liabilities. The higher the ratio, the greater the cushion between a company’s current obligations and its ability to meet them.
Debt
An amount owed for funds borrowed.
Delinquent
A debt that has become due and payable but remains overdue and unpaid.
Factoring
The outright purchase of accounts receivable.
Liabilities
Financial claims against an individual’s or firm’s assets; amounts owed to creditors.
Lien
An attachment, either voluntary or involuntary. A lender will apply a lien to encumber real or personal property.
Line of Credit
A form of revolving credit, which a business can borrow against at times it needs capital. Often accessed by check, ATM, or business card.
Liquidity
The quality of being readily convertible into cash.
Loan-to-Value Ratio (LTV)
The relationship between the amount of the loan and the value of the real property expressed as a percentage.
Personal Guarantee
A guarantee that the primary owner will assume personal responsibility for repayment of the loan, should the company not repay the loan.
Principal
The amount of a loan from which interest is calculated.
Promissory Note
Also known as a note; literally, a promise to pay. A written contract between a borrower and a lender which is signed by the borrower and provides evidence of the borrower’s indebtedness to the lender.
Security
A pledge made to secure the performance of a contract or the fulfillment of an obligation, such as the repayment of a loan.
Small Business Administration
Established by Congress, the SBA provides financial, technical, and management assistance to help Americans start, run, and grow their businesses.
Term
The maturity or length of time for final repayment of a loan.
The Three C's of Banking
Credit, Capacity and Character. These are the three primary areas on which a bank focuses before lending to its borrower.
Unsecured Loan
A loan granted upon the good credit of the borrower. No collateral involved.
